Integrating Latin American Stock Markets: the Mercado Integrado Latinoamericano (Mila): Innovations and Perspectives Dante Figueroa Washington College of Law
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American University Business Law Review Volume 3 | Issue 2 Article 2 2013 Integrating Latin American Stock Markets: The Mercado Integrado Latinoamericano (Mila): Innovations And Perspectives Dante Figueroa Washington College of Law Follow this and additional works at: http://digitalcommons.wcl.american.edu/aublr Part of the Banking and Finance Law Commons, and the International Law Commons Recommended Citation Figueroa, Dante "Integrating Latin American Stock Markets: The eM rcado Integrado Latinoamericano (Mila): Innovations And Perspectives," American University Business Law Review, Vol. 3, No. 2 (2018) . Available at: http://digitalcommons.wcl.american.edu/aublr/vol3/iss2/2 This Article is brought to you for free and open access by the Washington College of Law Journals & Law Reviews at Digital Commons @ American University Washington College of Law. It has been accepted for inclusion in American University Business Law Review by an authorized editor of Digital Commons @ American University Washington College of Law. For more information, please contact [email protected]. INTEGRATING LATIN AMERICAN STOCK MARKETS: THE MERCADO INTEGRADO LA TINOAMERICANO (MILA): INNOVATIONS AND PERSPECTIVES BY DANTE FIGUEROA* Introduction ..................................................... 278 I. Euronext and NYSE: The Rise of Integrated Stock Markets..........279 II. Description of the Legal Framework of the Stock Markets of Chile, Peru, and Colombia... .....................................282 1. Legal Framework of the Peruvian Financial Market...............282 A. Brief History of the Peruvian Stock Market .... ...... 282 B. Regulatory Scheme...........................283 C. Main Institutions of the Peruvian Stock Market................284 i. The Lima Stock Market.....................285 ii. CAVALI...............................285 iii. The SMV .................................... 286 D. Current Information on the Peruvian Financial Markets ...286 2. Legal Framework of the Colombian Financial Market ........... 287 A. Brief History of the Colombian Stock Market...................287 B. Regulatory Scheme...........................288 C. Main Institutions of the Colombian Stock Market ............ 289 i. The Stock Market of Colombia ............... 289 ii. DECEVAL ........................ ...... 289 iii. The Financial Superintendence of Colombia..............289 3. Legal Framework of the Chilean Financial Market.................290 A. Brief History of the Chilean Stock Market ..... ...... 290 * Dante Figueroa, Esq., is a Partner at Washington, D.C.-based W5ss & Partners, PPLC (http://www.woessetpartners.com/IATG/) in the areas of international arbitration and trade. He is a member of the Chile, New York, Washington, D.C., U.S. Supreme Court, and U.S. Court of International Trade bars, and is an Adjunct Professor at the Georgetown Law Center, and the Washington College of Law. His publications are available at: http://ssrn.com/author-1015723, and he can be reached at: [email protected]. 277 278 AMERICAN UNIVERSITY BUSINESSLA WREVIEW Vol. 3:2 B. Regulatory Scheme ...................................291 C. Main Institutions of the Chilean Stock Market..................292 i. The Santiago Stock Exchange ........... ..... 292 ii. DCV ......... ................. ..... 292 iii. The Securities and Insurance Superintendence...........292 D. Current Information .................................293 III. Legal Structure and Operational Aspects of MILA Mechanisms...293 1. History and Negotiation of MILA ............ ....... 294 2. Purpose and Operation of MILA ............ ......... 297 3. Principal Advantages Created by MILA for the Integration of the Financial Markets of the Parties .......... ......... 299 A. Benefits for Investors ................... ...... 299 B. Benefits for Issuers ........................... 299 C. Benefits for Intermediaries ........... ........ 299 D. Benefits for Markets ................................300 4. MILA's Benefits for U.S. Investors .................. 300 Conclusion ....................................................302 INTRODUCTION This Article reviews the main aspects of the Latin American Integrated Market (Mercado Integrado Latinoamericano) ("MILA"), its principal characteristics, its structure, and the prospects for the development of the financial markets of MILA's signatory countries. The MILA initiative creates a genuine investment opportunity for U.S. investors to take advantage of the benefits generated by an integrated stock market in South America. As this Article will explain further, U.S. investors may benefit from larger economies of scale, more uniform and harmonized information, creation of new financial products, early notification of regulatory changes, multiple market exposure, and the singular position of trading in three financial systems at once. Accordingly, U.S. investors may find in MILA a "one-way street" for investing in securities of the three (and potentially four if Mexico were to join MILA) jurisdictions whose economies are sound, and who are jointly taking enormous strides toward strengthening, harmonizing, and expanding their securities markets. MILA constitutes an authentic effort to deepen the connections and opportunities between the stock markets of Latin America's reputedly most prosperous and consistently open economies: Chile, Colombia, and Peru. The motivation for MILA's creation arises from a growing interest in the globalization of financial markets around the world. In this context, this Article reviews the broader context of the rise of integrated stock markets around the world, and then provides a description 2014 INTEGRA TING LA TINAMERICAN STOCK MARKETS 279 of the financial markets of Chile, Colombia, and Peru, explaining the context in which MILA emerged as an alternative created by the pro- market economies of these three prosperous countries of the southern cone of South America aimed at facilitating the functioning of their stock markets and the creation of wealth. To frame this development, Part I of this Article provides a discrete overview of the rise of integrated stock markets around the world. Specifically, it traces the development of Euronext and its integration with the New York Stock Exchange ("NYSE"). Part II of this Article examines the legal framework of the stock markets of each of MILA's signatory countries, providing a background for understanding the creation and prospects of MILA, and presenting a basic definition and explanation of MILA including the legal structure, practical advantages, and operational aspects of its mechanisms. Part III of this Article discusses the main steps followed by the parties toward the signature of MILA's Framework Agreement ("MILA Agreement"), and the main advantages of this integration for MILA's members. Part IV of this Article discusses the recent efforts undertaken by Mexico to join the MILA Agreement. Finally, Part V of this Article presents a few closing thoughts on MILA's potential as the foundation for the integration of Latin American stock markets. I. EURONEXT AND NYSE: THE RISE OF INTEGRATED STOCK MARKETS During the last three decades, there has been a global trend in favor of market integration, and more specifically in favor of stock market integration.' One commentator identifies several factors as probable causes of this trend, including the need to improve national competitiveness in a world of multilateral trading systems; 2 the reduction of barriers on mobility triggered by globalization, market liberalization, and deregulation; 3 and the revolution in information technology that has facilitated transactions in the banking and financial sectors.4 Consequently, stock market integration has found fertile grounds around the globe, and Latin America is not an exception to this global development. I. See Hooy CHEE Wool, STOCK MARKET INTEGRATION AND THE PRICING FOR REGIONALISM 1-10 (2010) (discussing stock market integration in the form of regional "trading-blocs"). 2. Id. at 5. 3. Id.at 7. 4. Id. at 8. 280 AMERICAN UNIVERSITY BUSINESSLAW REVIEW Vol. 3:2 The most relevant instances of stock market integration are found in the United States and the European Union. The leading initiatives in this field were the creation of Euronext in 2001; the integration of the New York Stock Exchange ("NYSE") and Euronext in 2007; and the recent efforts to integrate the NYSE Euronext group and the Tokyo Stock Exchange.5 Euronext, which is the first massive experiment of stock market integration, was incorporated into the framework of the European Union's economic integration. 6 Euronext is a result of the initial merger of the Paris Bourse SBF SA, the Brussels Stock Exchange, and the Amsterdam Stock Exchange, which went public in July 2001.' After this initial merger, Euronext also integrated the Lisbon Stock Exchange, the London International Financial Futures and Options Exchange, and the Deutsche Bbrse.8 A few years after the Euronext merger, on April 4, 2007, the NYSE Group, Inc. entered into a merger with the Euronext N.V., a private Dutch finance company, 9 creating one of the largest operators of the financial market in the world: NYSE Euronext group.'0 Today, NYSE Euronext represents "one-third of the world's equities trading [and is] the most liquid of any global exchange group."" Finally, the most recent initiative in stock market integration originates from the agreement signed in March 2011 between the world's two main stock market groups, NYSE Euronext and 5. In 2011, the Tokyo Stock